Median Salary

What You Need to Know About Earnings

Woman's hand giving stack of US $20 bills to man's hand
••• Stockbyte/Stockbyte/Getty Images

One of the most pressing questions to answer when exploring careers is "How much will I earn?" While compensation is a weaker predictor of job satisfaction than other factors such as whether an occupation is a good fit, it is essential to be aware of potential earnings if you choose to pursue a particular career. After all, everyone has bills to pay. Always learn about the median salary when doing your research.

What is Median Salary?

The Bureau of Labor Statistics, a division of the U.S. Department of Labor, reports the median salary for hundreds of occupations. The word "median" literally means the middle and, as it pertains to salaries, it is the one that, if you list in numerical order all the salaries for every individual working in an occupation, falls in the middle of the list. Half the individuals on that list earns less than the median and half earns more.

Calculating the median when there is an odd number of figures requires an extra step. Since there isn't a figure that is dead center on the list, the median is the average of the two salaries that fall in the middle.

Let's look at a couple of examples. For the first, we'll say there are three widget makers. Their salaries, from lowest to highest, are $20,000, $30,000 and $35,000. The median salary is $30,000. That was easy because there is clearly a middle figure.

But, what if there is a fourth widget maker who earns $33,000. Now there are two middle figures: $30,000 and $33,000. We need to average those two figures which we can do by adding them together ($30,000+$33,000) and dividing the sum by two ($63,000÷2). The median is $31,500.

Why Do You Need to Know About Earnings?

Not only should you know about earnings when choosing a career, but it is also imperative to have this information when negotiating your salary with a current or prospective employer.

  It will allow you to determine whether a job offer is fair. 

In addition to learning about general salaries for your occupation, also find out the compensation for individuals with your level of experience and, since salaries differ geographically, see how much people earn in your region. CareerOneStop, a website sponsored by the U.S. Department of Labor, has salary information for about 900 occupations. Use the Salary Finder to search by occupation and location.

How Else Is Salary Reported?

Some career information resources report the mean instead of the median salary. Mean is another word for average. It is calculated by adding together the salaries of everyone working in an occupation and then dividing the total by the number of people. Take the earlier example of the widget makers' earnings. Remember our three widget makers (the only ones working in the U.S.) earned $20,000, $30,000, and $35,000, respectively. When added together ($20,000+$30,000+$35,000) the total is $85,000. To get the mean, divide the total by the number of widget makers: $85,000÷3. The mean is  $28,333.33. As this example demonstrates, the mean and the median, $30,000 in this instance, are frequently different from one another.

The median salary, rather than the mean salary, more accurately represents actual earnings in an occupation.

Why You Should Look at Median Salary Instead of Mean Salary

In the above example, we looked at three salaries that had a difference of $15,000 between the highest and lowest ones ($35,000-$20,000). It is not unusual for there to be a disparity between the lowest and highest salaries in a field. It takes into account how employers compensate entry-level earners versus how much they pay workers with many years of experience, as well as the salaries of all the employees in between. There are also outliers—workers who make very little and those with exceptionally high salaries.

Let's look at another example. There are nine earthworm farmers. Two earn $18,000 each, three of them are each paid $19,000, and two make $20,000 apiece.

Another works for a stingy boss and only earns $10,000. One gets a very generous salary of $45,000 (he is the stingy boss). These are the outliers, as discussed above.

To get the mean salary, we total those amounts, as follows:

      $18,000
    +$18,000
    +$19,000
    +$19,000
    +$19,000
    +$20,000
    +$20,000
    +$10,000
    +$45,000
Total: $188,000

Then we divide the result, $188,000, by the number of workers (9) and get a mean salary of approximately $20,889. That is higher than what most people working in this field earn, particularly the one with the lowest compensation, but significantly less than the highest earner's salary. The median salary is not as likely as the mean salary to be skewed by outliers, for example, an extremely high or low salary that only a few people may earn. When you put the earthworm farmers' salaries in numerical order ($10,000, $18,000, $18,000, $19,000, $19,000, $19,000, $20,000, $20,000, $45,000), you discover that the median salary is $19,000. That is more in line with what the majority of earthworm farmers in our example earn than the average or mean of $20,889.